Toyota shareholders demand vote against CEO Toyoda as automaker embroiled in ET EnergyWorld testing scandal

Toyota CEO Akio Toyoda will face several disgruntled shareholders this week as two major proxy groups demand a vote against keeping the founder’s grandson on the board.

The vote, expected at the annual shareholder meeting on June 18, follows Toyota’s recent apology over bogus vehicle certification tests, a major embarrassment for a company that prides itself on its reputation for quality excellence. A number of issues at Japanese automakers, including Toyota, are said to be unrelated to safety issues and no recalls have been announced. However, Toyota has suspended production of three models produced by group companies in Japan.

Toyota’s stock prices have tripled in the past five years, reaching almost 3,800 yen ($24), before falling sharply amid recent problems. Its shares are currently trading above 3,000 yen ($20), representing a loss of about 3 trillion Japanese yen ($18 billion) in market value.

Institutional Shareholder Services, a majority-owned subsidiary of German capital markets firm Deutsche Borse Group that advises investors, said in its report to shareholders that Toyoda “should be deemed ultimately liable.”

continued below

He noted that his promises of change did not include a management shake-up. Although Toyota said it planned to communicate better with workers in the field, it probably wasn’t enough to prevent cheating problems from recurring during testing, ISS found.

“In fact, the company’s tendency to preserve its corporate culture is suspected and Toyoda should be held accountable for this,” it said.

ISS does not oppose the nomination of the remaining board members, including Toyota CEO Koji Sato, who will take up his position in 2023.

Last year brought a wave of scandals related to improper vehicle inspections, including crash tests, in Daihatsu Motor Co. group companies producing small models, truck manufacturer Hino Motors and Toyota Industries Corp., a manufacturer of forklifts and other machinery.

Japanese officials say such violations have also been found at Honda Motor Co., Mazda Motor Corp. and Suzuki Motor Corp.

Another major shareholder, proxy advisory firm Glass Lewis & Co., recommended voting against the reappointment of Toyoda and Shigeru Hayakawa, another top executive.

“More specifically, we hold that Mr. Toyoda is liable for failing to ensure that the Group maintains adequate internal controls and for failing to ensure that appropriate management measures are implemented across the Group companies,” it said in its proxy report.

“Furthermore, given the widespread occurrence of problems across the Toyota Group, it raises further questions about the corporate culture that has developed under Mr. Toyoda’s leadership.”

Hayakawa oversaw board member nominations, and more independent members should be added to the board, according to San Francisco-based Glass Lewis. She also recommended voting against Toyota’s lobbying proposal on climate change, stressing the need for greater disclosure.

Under Toyoda, the automaker has pushed a “multi-pronged” approach to green vehicles, emphasizing hybrids that have both a gasoline engine and an electric motor, and using hydrogen as a fuel rather than focusing on battery-powered electric vehicles, which some environmentalists favor to reducing car costs. emissions.

Toyoda is unlikely to be ousted at the annual shareholder meeting, which will be held at the company’s headquarters in central Japan, named after the maker of the Prius hybrid, Lexus luxury models and the Camry sedan.

The largest of Toyota’s nearly 1 million shareholders are Japanese companies, such as Japanese banks and financial institutions, which are unlikely to pose a challenge to the automaker. The other shareholder is Toyota Industries, a group company.

The tight cross-shareholding between affiliates that has long prevailed in Japan is gradually fading, but long-term loyalty is likely strong enough to keep Toyoda in his position. He won re-election last year with almost 85 percent. votes, although in 2022 it was less than 96%.

In a recent report on Toyota, Kazunori Maki, an automotive analyst at SMBC Nikko Securities, noted that Toyota’s suspended deliveries affected only 1-2 percent of its global sales.

He also suggested that factory workers may have circumvented rules considered scrupulous but irrelevant to safety.

In the fiscal year ended in March, Toyota’s profits doubled from a year earlier to 4.9 trillion yen ($31.9 billion), exceeding its own forecasts, as rising vehicle sales and a weak Japanese yen pushed up earnings for border.

Even though Toyota is lagging in its transition to electric vehicles, the company is the world’s leading automaker, with sales of 9.4 million vehicles in the fiscal year ending in March.

The company is doing well, said Aaron Ho, equity analyst at CFRA Research. The recent scandal would cause only “a little damage,” he said. “So there are no fundamental problems. “We just think that the production shutdown – we estimate probably for several months – will have an impact on supplies,” he told The Associated Press.

“We really don’t see any deterioration in the company culture or the way it’s managed.”

In his apology for the recent problems, Toyoda referred to the massive U.S. employee recall scandal shortly after he took over as CEO in 2009 over the so-called “unintended acceleration”.

Toyoda was questioned by Congress and apologized. This time he seemed to reassure himself and the public that Toyota had been through worse and survived.

“We are not a perfect company. However, if we see something wrong, we will take a step back and continue to try to fix it,” he said.

Most read on Power